Talking Points:
- William Dudley says Chinese FX intervention to have “global implications for the world economy”
- Dudley maintains belief Fed will raise short-term interest rates in the near future
- Fed President says need better “match” in job seekers and employers
Federal Reserve Bank of New York President William Dudley said the Chinese intervention in FX markets this week will have “huge implications in the global economy” and the world will “be watching very closely” for the lasting effect. Dudley added it is premature to judge the long-term implications of the intervention and remarked, “I am going to leave dollar policy to the U.S. Treasury” when prompted to comment on the implications on the US monetary policy.
William Dudley answered questions from the attendees and seemed to take a centrist approach when asked about the central benchmark. In regards to liftoff he said, “hopefully in the near future, we will actually begin to raise rates.” Following a question on the specific timeline he said, “We are certainly getting nearer to that point.” Dudley maintains a neutral position in the FOMC monetary policy lean.
When asked about recent employment trends Dudley remarked, “monetary policy can help labor markets recovery by providing incentives for firms to invest and grow.” He raised concerns about “skill mismatches” causing “friction” between employers and job seekers. His comments follow a contraction in the JOLTS Job Openings indicator from this morning. Earlier in the week, Fed Vice Chair Stanley Fischer said the US labor market is nearly back to full health.
China’s first FX devaluation Tuesday morning caused a ripple effect in global financial markets beyond a spike in the USDCNH pair. In Wednesday’s Asia session, the PBoC issued a second intervention further encouraging a drop from the Yuan. Despite their efforts, officials commented market forces would dictate a daily fix in any further action. Dudley’s speech did little for Dollar strength, which has weakened for most of the day (See David Rodriguez’s USD Technical Analysis).
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Chart Produced by John Kicklighter
